Regulation & Client ProtectionCFTCCommodity Futures Trading Commission
CFTC (Commodity Futures Trading Commission)
The US federal regulator of derivatives markets, including retail off-exchange forex.
What CFTC (Commodity Futures Trading Commission) means
The Commodity Futures Trading Commission is the independent US federal agency that regulates derivatives markets, including futures, options and off-exchange retail foreign exchange. A firm acting as counterparty to US retail forex customers must register with the CFTC as a retail foreign exchange dealer or futures commission merchant and become a member of the National Futures Association. Registration status is verifiable through NFA BASIC, and soliciting US retail clients without it is unlawful regardless of what licence the firm holds elsewhere.
The US regime is restrictive by design. Retail forex leverage is capped at 50:1 on major currency pairs and 20:1 on all other pairs, offsetting positions in the same pair must be closed on a first-in-first-out basis so hedging within one account is not permitted, and contracts for difference cannot be offered to US retail clients at all. Registered dealers face capital requirements in the tens of millions of dollars, must report financial data regularly, and must disclose quarterly the percentage of customer accounts that were profitable.
None of this protects against market losses, and the safeguards differ from securities or futures customers. Retail forex customer funds do not receive the same statutory segregation and bankruptcy priority as exchange-traded futures customer funds, and there is no SIPC-style compensation fund for retail forex, so a dealer's insolvency can mean recovering only a fraction of the balance. The CFTC does not approve strategies, vet individual fills, or offer recourse against unregistered offshore firms that accept US clients in breach of the rules.
Worked example
A US retail client who is long and then sells the same amount of EUR/USD does not open a hedge: the FIFO rule closes the original position. To hold offsetting exposure the client would need a strategy or instrument outside the retail forex rules entirely.
Related terms
- NFA (National Futures Association)The self-regulatory organisation for the US derivatives industry, designated by and accountable to the CFTC.
- Leverage CapA regulatory ceiling on the leverage a broker may offer retail clients, varying widely between jurisdictions.
- Hedging AccountAn account model allowing simultaneous long and short positions in the same instrument as separate tickets.
- Netting AccountAn account model in which all trades in one instrument are combined into a single aggregate position.
- Segregated AccountsClient money held in bank accounts separate from the broker's own funds, so it is not available to the firm's creditors.
Frequently asked questions
What does CFTC (Commodity Futures Trading Commission) mean in forex trading?
The US federal regulator of derivatives markets, including retail off-exchange forex.
How does CFTC (Commodity Futures Trading Commission) work in practice?
The US regime is restrictive by design. Retail forex leverage is capped at 50:1 on major currency pairs and 20:1 on all other pairs, offsetting positions in the same pair must be closed on a first-in-first-out basis so hedging within one account is not permitted, and contracts for difference cannot be offered to US retail clients at all. Registered dealers face capital requirements in the tens of millions of dollars, must report financial data regularly, and must disclose quarterly the percentage of customer accounts that were profitable.
What is an example of CFTC (Commodity Futures Trading Commission)?
A US retail client who is long and then sells the same amount of EUR/USD does not open a hedge: the FIFO rule closes the original position. To hold offsetting exposure the client would need a strategy or instrument outside the retail forex rules entirely.
Trade with a regulated broker
Understanding the terminology is the cheap part. The expensive part is choosing a counterparty whose execution, financing and withdrawal behaviour match what the marketing implies. Every broker below has been reviewed with a funded live account, and each review states which legal entity and which regulator applies to the account you would actually open.
Check the licence on the regulator's own register before you deposit — our regulators directory explains what each authority enforces, from leverage caps to compensation limits.